The first session of the trading week was a modest one overnight and while tech stocks on the NASDAQ bloomed ever higher, most other equity markets stalled out as bond yields rose across the board. Currency markets were equally sanguine without much intrasession volatiltiy although Yen sold off appreciably against USD while commodity prices saw a new yearly high for oil, while gold was hit hard again after failing to breach the $1900USD per ounce level amid a resurgent and stronger USD.
Bitcoin zoomed through the $40K level overnight, fulfilling that nascent and very contrary bullish falling wedge pattern with a big gap to start the week, surpassing the last two resistance step downs. This is not out of nature for the volatile crypto market and could have further legs up through the $42K level next:
Looking at share markets in Asia from yesterday’s session, where Chinese stock markets were closed with the Hang Seng Index poised here just above the 28700 point level. Price action is still showing an inability to decisively clear resistance at the 29000 point level keeping this market contained but support is building at the 28500 point area with no new substantive daily lows as momentum remains positive. Not yet time to abandon and sell up just yet:
Japanese stocks were the only major market open and saw a strong bid due to a selloff in Yen, with the Nikkei 225 closing 0.7% higher at 29161 points. Daily futures are pointing to a continuation of this breakout above 29000 points as the low moving average remains solid short term support here with a modest upside target at the 29500 point level:
The ASX200 was closed yesterday but Australian stocks are ready to zoom higher with SPI futures still up nearly 50 points or over 0.6% indicating a very solid start for today’s session. The daily chart is showing a lot of overbought momentum readings, but price has been well supported since the breakout above 7000 points and with the Australian dollar on the ropes and iron ore continuing its heavenly ascent what can go wrong:
European markets were generally bullish again overnight although the German DAX stumbled a little, losing 0.2% to close at 15673 points. The daily chart remains nominally positive, although momentum readings are also nominally overbought only just so with acceleration on the lowside still here, despite a much lower Euro:
Wall Street was a bit divergent again overnight, starting the week in a three way fashion with the headline Dow pulling back, the NASDAQ zooming higher while the S&P500 was more modest, finishing up 0.2% again at 4255 points, still making a new record high and up nearly 40% in the last 12 months. Price action on the four hourly chart shows some hesitation mid-session with resistance building at the 4250 point level. I still contend some exhaustion is setting in here as we wait for the Fed’s next meeting:
Currency markets are still recovering from the Friday night whallop with USD still firm against most of the majors again overnight. Euro has found some life and crawled back up above the 1.21 handle but only just, still matching the previous weekly low. I said yesterday that this small bounce was to be expected, but it maybe over before it started as the real trend reveals itself:
The USDJPY pair this time had a proper substantive breakout, clearing overhead ATR trailing resistance on the four hourly chart and broke through the 110 handle to almost match its previous weekly high. This should provide a good tailwind for Japanese stocks, although the overbought status and the previous high not that far away does make some cause for concern, the longer term charts are pointing to a return to the March highs:
The Australian dollar is also trying to recover from its Friday night selloff, managing to lift just above the 77 handle despite the absence of local traders yesterday. Resistance at the 77.70 level and the dominant downtrend remains too hard to clear and while momentum is extremely oversold we could see more downside here and a possible return to the previous weekly lows around the mid 76 level:
Oil prices continue to edge higher with Brent crude pushed up above the $73USD per barrel level for a new yearly high this time. What a trend! The potential for a run up to the 2018 high at $83 or so continues to build here with the low moving average never under threat – but I don’t like this too low volatility that will lead to high volatility:
Gold just can’t get past that $1900USD per ounce barrier and after the sharp selloff on Friday night it followed through overnight with a brief touch of trailing daily ATR support at the $1850 level before barely recovering to the $1866USD level, as momentum goes off the rails. This close below the low moving average and the touching of ATR support is presaging more downside below:
Glossary of Acronyms and Technical Analysis Terms:
ATR: Average True Range – measures the degree of price volatility averaged over a time period
ATR Support/Resistance: a ratcheting mechanism that follows price below/above a trend, that if breached shows above average volatility
CCI: Commodity Channel Index: a momentum reading that calculates current price away from the statistical mean or “typical” price to indicate overbought (far above the mean) or oversold (far below the mean)
Low/High Moving Average: rolling mean of prices in this case, the low and high for the day/hour which creates a band around the actual price movement
FOMC: Federal Open Market Committee, monthly meeting of Federal Reserve regarding monetary policy (setting interest rates)
DOE: US Department of Energy
Uncle Point: or stop loss point, a level at which you’ve clearly been wrong on your position, so cry uncle and get out!